Summary
Dermatology, formerly a heritage area for GSK, currently accounts for less than 3% of the company's total pharmaceutical turnover. Incorporation of Stiefel's business will only bring this up to around 6%. Neither company has succeeded since the 1980s in developing genuinely novel dermatologicals - it's some years since dermatology has been a therapeutic area GSK has actively pursued.
Analysis
GSK has blown hot and cold over dermatologicals since their heyday within the company in the 1960s & 1970s as innovators of topical steroids. The company missed out on monoclonal antibodies - one of the very few genuine innovations in dermatology over the past 40 years. Whilst adding the Stiefel business substantially increases GSK's dermatological sales, it hardly creates critical mass within such a large pharmaceutical company. Nor is there any real prospect of genuinely novel dermatologicals reaching the market from the Stiefel pipeline. However, because of the absence of new dermatologicals generally, and the limited success of generics in this market, existing dermatological business is more protected than most other therapeutic areas are. Also because it is not now a major therapeutic area, most major companies aren't interested in the bread and butter business of dermatology - and so the strength of competition is less than in other markets. GSK's move should be seen principally as minor consolidation - it is a modest strategic move most unlikely to have any substantial impact on GSK's overall performance. GSK has the option in due course of spinning off a sound if unexciting business.
